Dai is the world’s first unbiased currency that navigates the constant price volatility of cryptocurrencies. MakerDAO is an open-source project on the Ethereum blockchain and a Decentralized Autonomous Organization created in 2014. Cryptocurrency prices can fluctuate dramatically in a given day, preventing wider adoption due to concerns with unpredictability and reliability. As a result, stablecoins have emerged to counteract the problem. A stablecoin is a cryptocurrency whose price is attached to a centralized or decentralized stable asset, such as the US dollar, to reduce the erratic fluctuations in price experienced with cryptocurrencies. Maker’s Dai is a decentralized, unbiased, collateral-backed cryptocurrency soft-pegged to the US Dollar. Resistant to hyperinflation due to its low volatility, Dai offers economic freedom and opportunity to anyone, anywhere.
Dai is a Stable, Decentralized Currency that does not Discriminate.
MakerDAO launched their stablecoin Dai with a soft peg to the US Dollar. This means that the value of one Dai will always be approximately $1 USD. Dai is built on the Ethereum network and backed by any number of ERC 20 tokens (ETH, BAT, etc), meaning that it is completely decentralized because its price stability is sustained on through a system of smart contracts, and does not rely on any banks, governments, or other centralized third parties to provide access.
The Maker Protocol- Smart Contracts that Power Dai
The Maker Protocol, built on the Ethereum blockchain, enables users to create currency. The Protocol is also known as the Multi-Collateral Dai (MCD) system and allows users to generate Dai by leveraging collateral assets approved by “Maker Governance.” Apart from Dai, the project also has another token, Maker (MKR), that acts as a governance token. A community of MKR token holders govern the Maker Protocol, the smart contracts that power Dai.
Maker Governance is the community organized and operated process of managing the various aspects of the Maker Protocol. Maker’s governance token, MKR, helps to govern the system. MKR holders are responsible for governing the Maker Protocol, which includes adjusting policy for the Dai stablecoin, choosing new collateral types, and improving governance itself. Current elements of the Maker Protocol are the Dai stablecoin, Maker Collateral Vaults, Oracles, and Voting. MakerDAO governs the Maker Protocol by deciding on key parameters (e.g., stability fees, collateral types/rates, etc.) through the voting power of MKR holders.
How is the Maker Protocol Governed?
Through a system of scientific governance involving Executive Voting and Governance Polling, MKR holders manage the Maker Protocol and the financial risks of Dai to ensure its stability, transparency, and efficiency. Governance of MakerDAO can be divided into two main parts: on-chain and off-chain. MKR token holders, who are the primary stakeholders of the system, vote using the Maker Protocol's on-chain governance system. There are two types of votes in this system, Governance Polls and Executive Votes and anyone who owns MKR can participate in these votes. Stakeholders participate in governance off-chain by engaging with the community and other stakeholders in places like the forums and the public governance calls. MKR token holders vote on system parameter changes, positional mandates, bug fixes, technical improvements to the protocol, governance-related processes, and operational spending for the system. MKR voting weight is proportional to the amount of MKR a voter stakes in the voting contract, meaning the more MKR tokens locked in the contract, the greater the voter’s decision-making power. Through Governance Polling, MKR holders are able to seek consensus on nearly anything.
Latest News, Partnerships and Announcements
MKR holders have accepted KNC (Kyber Network) and ZRX (0x) as new collateral assets in the Maker Protocol. Both tokens can now be used to open Maker Vaults in order to generate Dai. The flexibility of the Maker Protocol means that almost any kind of asset that can be tokenized can be added as collateral in the system, as long as it has appropriate risk parameters and is approved by Maker Governance. Adding KNC and ZRX to the list of collateral types is an exciting step. Users can now connect their wallets to Oasis Borrow and lock either type in a Maker Vault to generate Dai.
MakerDao governance has voted to accept Wrapped Bitcoin, wBTC, as a new collateral asset in the Maker Protocol. WBTC is the first ERC20 token backed 1:1 with Bitcoin. WBTC marks the fourth collateral asset type to be added to the MakerDAO DeFi ecosystem. Bitcoin holders can trade their BTC to open a vault and generate Dai through wBTC, along with ETH, BAT, and USDC. “WBTC will help bring greater liquidity to the Ethereum and decentralized finance (DeFi) ecosystems, and to decentralized exchanges (DEXs).”
Maker, like many crypto participants, suffered losses during the price collapse of “Black Thursday” on March 12. MakerDAO has now updated its governance protocols to prevent another occurrence of forced liquidations that lead to huge losses. MakerDAO has since added the USDC stablecoin as a collateral on its lending market. Adding USDC as collateral will now help to stabilize the system after dramatic losses.